That’s what many analysts concluded based on a series of
weak economic reports last month. News that the U.S. economy
expanded at an anemic 1.8 percent rate in the first quarter
compared with 3.1 percent in the fourth seemed to solidify the
view that, like last year, the economy was slowing.

That reaction was unwarranted. Last week’s upbeat news on
April employment is only one reason to eschew the idea of 2010
redux.

Another stems from incongruities in the gross domestic
product report. The 1.8 percent increase in real GDP doesn’t
jibe with other information, including company reports on first-quarter profits and individual income tax withholding receipts.

“Excluding autos, real GDP was up 0.4 percent,” says Joe
Carson, director of economic research at AllianceBernstein in
New York. “How is that possible with year-over-year operating
profits up 20 percent?”

Profits come from production of goods and services.
Theoretically, output should equal the income from that output,
or gross domestic income, which includes profits, wages and
rents. In reality, it doesn’t, which is why the Bureau of
Economic Analysis adds a line in its GDP report for
“statistical discrepancy.”

The BEA won’t report its measure of corporate profits until
later this month, along with its revision to first-quarter GDP.
The implied increase of 6 percent year-over-year, which Carson
extrapolated from the GDP report, is well shy of what companies
are reporting.

‘Statistical Discrepancies’

Carson found a few other statistical discrepancies in the
GDP data. Investment in non-residential structures fell an
annualized 21.7 percent, which was a much bigger decline than
implied by monthly reports on employment, production and
shipments and is likely related to bad weather.

“If it’s transitory, it has to come back,” he says.

What’s more, the reported 8.1 percent decline in nominal
defense spending last quarter defies the BEA’s own estimates of
a 13.8 percent increase as translated from proposed budget
expenditures into a GDP framework. (Maybe the plus sign got lost
in translation.)

Together, the two components -- defense and non-residential
structures -- subtracted 1.3 percentage points from first-quarter growth, according to Carson, turning what would have
been a respectable quarter into a lousy one.

Transfer Payments

There are more reasons to think 2011 won’t repeat 2010’s
start-stop pattern. While very little of the Fed’s bond-buying
has spilled over onto the broadest measure of the money supply,
M2 rose at a 6 percent annualized rate in the last three months.
A year ago, M2 showed no growth. Even though bank credit still
isn’t expanding, banks at least eased credit terms in the first
quarter, according to the Federal Reserve’s senior loan
officers’ April survey.

Withheld income tax receipts are running way ahead of last
year, up 17 percent in the fourth quarter and 12 percent in the
first, according to Carson. Taxes aren’t withheld on income that
isn’t earned.

Finally there are the waning effects of “fiscal
stimulus,” or government spending by another name. Since one
dollar can’t be spent by two entities at the same time,
government spending can only substitute for private spending.
Any resulting increase in GDP is temporary.

Even the government acknowledges as much by referring to
money given to individuals in the form of unemployment
compensation or Social Security benefits as “transfer
payments.”

Post-Crisis Patterns

And that’s exactly what they are. The government, through
borrowing or taxation, transfers purchasing power from one
entity to another. (Whether the government has a moral
obligation to help the truly needy is a separate issue. This is
a purely arithmetic calculation.) Individuals allocate their own
money more efficiently than the government.

This isn’t to say the U.S. economy is about to take off, as
it did following the long and deep recessions of the 1970s and
1980s. Financial crises produce different outcomes than your
garden variety Fed-tightens-to-tame-inflation recession does.

For example, following financial crises, real house prices
decline for six years on average, according to economists Ken
Rogoff and Carmen Reinhart, authors of “This Time Is
Different.” Unemployment is slow to recover as well, compared
with stock prices and GDP, which fall hard but rebound more
quickly.

Vital Signs

The politically sensitive unemployment rate, derived from a
survey of households, was the biggest negative in Friday’s jobs
report. The rate bounced back up to 9 percent last month from
8.8 percent in March. Still, that follows a full percentage
point decline in the preceding four months and probably isn’t
indicative of a new trend, the sharp spike in weekly jobless
claims notwithstanding.

More significant was the addition of 268,000 private-sector
jobs in April. Net revisions to prior months were positive. The
average February through April private payroll gain (253,000)
was the largest since 2006.

The most impressive news in the April employment report was
the breadth of hiring. More than 70 percent of all non-farm
industries added workers in the past three months, a share last
seen in 1998.

Jobless recoveries have been the norm following the past
three recessions. Employers have gotten more creative about
cutting costs and maximizing productivity. They hire temporary
workers to satisfy increased demand until they’re comfortable
the economy has turned the corner.

The pick-up in the hiring pace is a signal to the Fed that
businesses, for their part, see the recovery is “self-sustaining.”

Just one more reason to expect 2011 to differentiate itself
from 2010.

(Caroline Baum, author of “Just What I Said,” is a Bloomberg
News columnist. The opinions expressed are her own.)